Metro Manila (CNN Philippines, October 11) — Filipino workers may need to reconsider retirement plans after the Philippines landed at the bottom second of a global survey on pension systems.
The Mercer CFA Institute’s 2022 Global Pension Index (MCGPI) released on Tuesday ranked 44 retirement income systems from around the world, which accounts for 65% of the world population.
The Philippines was at 43rd with an overall score of 42, next to cellar-dweller Thailand.
Mercer said the country’s index value declined slightly from 42.7 in 2021 “primarily due to some minor adjustments.”
The country received a score of 40.5 on the adequacy indicator, which takes into account the retirement benefits offered to the poor and a range of income earners, as well as aspects that improve the overall efficacy of the retirement income system.
Meanwhile, it scored 52.3 on sustainability, which considers the variables that influence long-term sustainability of systems, such as the labor force participation rate of older population and level of real economic growth.
For integrity, which looks into the three main elements of the pension system, namely, regulation and governance, protection and communication for members, and operating costs, the Philippines’ retirement income system ranked lowest in Asia and globally with a score of 30.
“Most retirement income systems in Asia saw overall improvements except for Mainland China, Indonesia, and the Philippines,” Mercer said in its 2022 survey.
While the MCGPI assesses and highlights the deficiencies of retirement income systems around the world, it also proposes feasible areas of reform that might help deliver more appropriate and sustainable retirement benefits.
To increase the Philippines’ index value, Mercer said the country could “increase the minimum level of support for the poorest aged individuals and increase coverage of employees in occupational pension schemes, thereby increasing the level of contributions and assets.”
It also recommended introducing non-cash-out options for retirement plan proceeds to be preserved for retirement purposes, improving the governance requirements for the private pension system, and setting aside funds in the public system for the future in order to lessen reliance on the pay-as-you-go system.
Iceland, Netherlands, and Denmark are the best places to retire based on the 2022 MCGPI. In Asia, Singapore retained its top spot, scoring the highest for both adequacy and sustainability, while Hong Kong had the highest score for integrity.
Mercer also pointed out that Japan and Malaysia were the most improved systems due to higher net pension replacement rates and a revised approach to pension plan coverage.
